Nonprofits must produce results if they want city funding

Updated 8:47 am, Saturday, May 31, 2014

A 2009 study found that San Francisco was funding 804 nonprofit vendors in the city at a cost of $483 million.

A 2009 study found that San Francisco was funding 804 nonprofit vendors in the city at a cost of $483 million.

Photo: Brant Ward, SFC

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Daniel Lurie visits the Compass Children's Center in San Francisco in 2011. Since 2005, Tipping Point has raised about $60 million and has funded 54 Bay Area nonprofits.

Daniel Lurie visits the Compass Children's Center in San Francisco in 2011. Since 2005, Tipping Point has raised about $60 million and has funded 54 Bay Area nonprofits.

Photo: Russell Yip, The Chronicle

Nonprofits must produce results if they want city funding

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San Francisco's social help network is wide, robust and wildly expensive. A 2009 study found that the city was funding 804 nonprofit vendors at a cost of $483 million. At the time, that was two to three times as much per person as Los Angeles, Sacramento and San Mateo counties.

And that was five years ago. If you don't think the numbers have gone up, you haven't been paying attention - this year the cost is above $500 million.

Needless to say, the tricky problem is to decide how funds are allocated. Some groups are doing wonderful, valuable work, and some, frankly, are wasting our time and money.

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Fortunately, over the years the city has hit upon a surefire system.

"It's whoever yells the loudest," said a former City Hall insider who spent years at the forefront of budget battles.

And it doesn't end with getting the original funding. Once a nonprofit is on the ledger sheet, it's unlikely that it will be removed the next year - even if performance isn't up to standard. That is if someone can figure out how to measure their goals. Accountability isn't a city strong point - we're better at throwing money at problems and hoping things all work out.

So here's a crazy idea. Suppose the social service network were run like a business. Suppose that at each round of funding, clear and definable goals were set.

And finally - and you'd better sit down for this one - suppose the nonprofits that weren't cutting it were told: "Sorry, this isn't working. We're not funding you this year."

It's been done, you know. Almost 10 years ago, Daniel Lurie founded Tipping Point, a charitable fundraising operation. Since 2005, Tipping Point has raised about $60 million and has funded 54 Bay Area nonprofits.

But here's the kicker. It's also dropped nine of those groups.

"We aren't afraid to make those tough decisions," said Lurie, 36. "If we see groups that aren't performing, we make the decision and move on."

Measuring results

Now, it isn't as if this has never occurred to city leaders. In 2009, then-Mayor Gavin Newsom formed a task force with civic leaders, including City Attorney Dennis Herrera, to produce a report titled "Partnering With Nonprofits in Tough Times."

"We were looking into best practices, recommendations, guidelines on performance," Herrera said. "We met every week for three or four months and came up with a lot of recommendations."

The report is fascinating and tough-minded. Among other things, it recommended: merging ineffective nonprofits and requiring city departments to "assertively implement, monitor and take action" on nonperforming groups.

And yes, to deliver the hard news and cut funding for those that aren't making it.

It was a well-researched report. And it went nowhere. The recommendations were too difficult, too unwieldy, too unpopular. And besides, how do you measure effectiveness?

"Holding your groups accountable is the holy grail of the nonprofit sector," Lurie said. "There's no profit and loss statement. Finding a single metric is the goal, but no one is there yet."

But if San Francisco would like a model, it would be worth starting with Tipping Point. For starters, the group really gets to know the applicant.

"We do a lot of due diligence up front," Lurie said. "It's important to vet them. We are not going to write you a check and see you in six months. In fact, we will probably see you next week."

Lurie said they look for "strong leadership, clean financials and a willingness to measure results."

Extra supervision

That last point is critical. The nonprofit has to come up with its own measuring metric - and if the results fall short, there are consequences. Lurie suggests that city government "doesn't have the bandwidth" to do that. Why not? If we're spending $500 million a year, surely there's enough to buy a little extra oversight.

Granted, if the city were to engage in a little tough love, it might anger some advocates. But it might also be a positive.

"Sometimes we've tried a group and it didn't work," Lurie said. "But I would say the model works. This is why we're attracting investors. There are decisions to be made, and we expect there will be more. But I believe we have built a culture of accountability."

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